FMT:
Pilot’s retrenchment
upheld, AirAsia’s ‘best fit’
policy fair, says court
The Industrial Court rules the airline was justified in deviating from the ‘last-in, first-out’ principle during the Covid-19 pandemic.
PETALING JAYA: The Industrial Court has upheld AirAsia’s retrenchment of an employee of 17 years’ standing, holding that the low cost carrier was entitled to use its “best fit” selection criteria to trim down the number of pilots on its books at the height of the Covid-19 pandemic.
In his award, court chairman Andersen Ong ruled that the airline was justified in deviating from the “last-in, first-out” (Lifo) principle when terminating the claimant’s employment with effect from June 14, 2020 in a retrenchment exercise.
“On the facts, there is no evidence of mala fide and any impropriety in relation to the claimant’s retrenchment,” Ong said in his 37-page award released, dated May 30.
The court accepted evidence adduced by the airline’s head of finance that it would have lost RM268 million in 2019 but for dividend income of RM712 million received from a subsidiary following the sale of aircraft.
“The Court accepts the company’s explanation for the hefty special dividend payout, noting that at the time it was declared, nobody knew of the coming of the Covid-19 pandemic,” said Ong.
Ong also noted that the airline had recorded a loss of RM477 million in the first quarter of 2020, leading to a “staggering” loss of RM3.665 billion for the financial year.
“The Covid-19 pandemic was unprecedented and no one foresaw the extent of the pandemic or how long it would last at the material time.
“The quarantines and cordon sanitaire measures implemented by various countries, including closure of international borders were also extraordinary and beyond everyone’s knowledge,” Ong said, noting that it resulted in numerous flight cancellations and the grounding of aircraft.
He also said that the movement control order imposed by the government on March 18, 2020 had significantly restricted interstate and international air travel.
As a result, the airline became “financially crippled” due to its “high fixed and variable costs”, leading to necessary organisational challenges as explained in two townhall sessions on May 29 and June 4, 2020.
“There was a real need for the company to embark on a business alignment exercise to retain a lean and efficient operations team of employees, including pilots, in order for the company to remain sustainable,” said Ong.
The court said that it is an established principle in industrial jurisprudence that decisions as to the size of the workforce and selection of staff fall within “management prerogative” and the court will not interfere unless it was done unfairly or in bad faith.
At trial, the airline adduced evidence to show that its “best fit” selection criteria involved the selection of pilots for retrenchment premised on their performance ratings and disciplinary record since 2016.
The claimant was selected as he had been assessed “must improve” in 2016, and “needs improvement” in 2019.
Ong noted that one of the reasons for the claimant’s 2019 rating was that he received four demerit points for having taken 16 days of medical leave as of Dec 31, 2019.
Dismissing the claimant’s contention that the airline had no right to retrench him as he was “entitled” to take medical leave, Ong said:
“It is not uncommon for companies to have policies to discourage employees from taking unnecessary medical leave and to promote staying healthy.”
The court went on to rule that the airline had applied its “best fit” selection criteria objectively to all its employees concerned, including the claimant. In doing so, Ong dismissed the claimant’s contention that the airline ought to have adopted the “Lifo” principle for retrenchment.
“The selection of employees to be retained or retrenched based on work locations, special skills or qualifications, performance ratings and disciplinary records is, to my mind, a valid reason to depart from the Lifo principle in order for the (airline) to achieve its objective in the face of a financial crisis,” said Ong.
He ruled that AirAsia’s business alignment exercise targeted at maintaining a lean and efficient operations team of pilots during the Covid-19 pandemic to mitigate financial adversity justified a deviation from the Lifo principle.
The court also ruled that the airline was not wrong in selecting the claimant over captains and pilots who were foreign nationals, saying there was no specific provision in the Code of Conduct for Industrial Harmony (CCIH) stipulating that locals should be retained over foreigners in any retrenchment exercise.
“On the contrary, the CCIH provides that the employer should select employees to be retrenched in accordance with objective criteria which means that the same criteria should apply to all employees.”
In any case, Ong said, prioritising local workers over more competent foreign workers can harm the organisation’s overall performance and productivity.
“Fair treatment in the workplace, including in cases of retrenchments, is crucial for maintaining high standards of work and ensuring social justice.
“The foreign pilots or captains who remained with the company were those who had better performance ratings than the claimant.
“Therefore, it makes no sense to insist that the Company should dismiss these better performing foreign pilots or Captains while retaining the Claimant solely based on nationality,” the award read.
FMT is withholding the claimant’s name.
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